ITC Ltd, India’s biggest tobacco maker, said its profit in the third quarter of this fiscal rose the fastest in the last seven quarters. This came from higher cigarette sales and rising occupancy rates at its network of hotels, the country’s second-largest.
Net profit gained 34 % in the three months to 31 December to Rs717 crore, from Rs 537 crore a year earlier. Six analysts surveyed by Bloomberg forecast profit at Rs 698 crore. Sales rose 24 % to Rs3,166 crore.
The sharp increase in wages in Asia is giving smokers more cash to spend on ITC’s 30 brands of cigarettes, driving a 14% rise in their sales.
Cigarettes account for only 14% of tobacco consumption in India, giving ITC room to attract consumers of hand-rolled bidis or chewing tobacco.
“With income levels rising, people who smoke bidis or chew tobacco are shifting to cigarettes,” said Abhijeet Kundu, an analyst at Prabhudas Lilladher Securities in Mumbai said. He has a “buy” rating on the stock.
Cigarette sales account for about half of ITC’s net revenue.
Profit before tax and one-time gains or charges increased 20 % to Rs 828 crore.
The company’s revenue from hotels, including a luxury property with rooms offering a view of the Taj Mahal, increased 29% to Rs 282 crore. Profit before tax and one- time gains or charges rose 55% to Rs 118 crore.
ITC’s hotels sales rose as revenue per available room gained 37%, driven by higher occupancy at its hotels in New Delhi, Mumbai and Bangalore, the company said.
Overseas tourist arrivals in India rose 13% in 2006,boosting occupancy at properties, including those franchised from Starwood Hotels & Resorts Worldwide Inc.
Revenue at the company’s agriculture business, which includes trading of commodities at home and overseas, increased 20 % to Rs 783 crore.
The company, which runs 12 rural supermarkets called Choupal Sagars, plans to add eight more by April this year, Kolkata-based ITC said. The Choupal Sagars also purchase produce from farmers and sell a range of agricultural inputs, consumer and household products.